PROBABLY the world’s most efficient, most analysed and most talked about supply chain in the world, has been upgraded even further in Australia.
Dell, the world’s number one PC manufacturer, recently made some 27 improvements including a new twelve thousand square metre warehouse (more a cross docking operation), weekend order processing and a tracking system for customers to monitor the progress of their orders online. Delivery time frames for corporate and public sector customers across Australia have now been reduced by over 40%.
Mike Gray, one of Dell's experts on supply chain (his business card reads ‘supply chain evangelist’), said one of the problems Dell had with Australia was in outbound logistics.
“Product would zip through our Penang (Malaysia) factory, which supplies South Asia down to ANZ, and then slow.
“So we re-engineered the process of the outbound supply chain and have taken the average delivery time from around 14 days to an average of five days,” he told Manufacturers’ Monthly on his recent trip to Australia.
Dell uses a re-engineering technique it calls BPI (Business Process Improvement), a combination of Six Sigma and Lean Manufacturing.
All Dell employees who care to are trained in BPI in terms of how to map a process, drive problems from the root cause, improve the process and then measure and monitor it to make sure that the improvements they put in place actually work.
“The difference between us and other companies is that we have a different industry paradigm. The paradigm other companies work to are; buy the material, make that material into something and sell it sometime after that. It’s a buy, make, sell activity.
“Dell’s difference is that we sell it first. We build to order,” explained Gray.
Dell’s philosophy is born from the variability of the product it builds. From a hardware perspective, Dell has 6 to 8 million permutations; then there is software on top of that.
Gray reveals Dell has just five days of inventory, with 76 inventory turns a year.
“That gives us some massive efficiencies, but if you look at our entire pipeline we have quite a bit of inventory, we just don’t happen to own it.
“When orders come in, mostly over the Internet/Intranet (60%), they go to the factory closest to the delivery point. We take that information and reschedule our factories, every factory, every two hours. Using our MRP system, we only schedule about 4 hours of work.
“That schedule is what triggers a request to our supplier/logistics centre. They then pick, pack and deliver the product as per their service level agreement which is 90 minutes from the time we ask for it,” Gray said.
Dell owns the material as soon as it leaves the supplier’s dock, but in many cases the dock is right next door to Dell’s facilities, and has been able to eliminate incoming receipt activity.
“Another paradigm we explode is serialisation, while most manufacturers stamp a serial number on the machine at the end of the manufacturing process; we create the number at the beginning of the process.
“We track the machine all the way through the manufacturing process, and are able to associate the serialised parts that we are putting into that machine with the serial number of that machine.
“That’s the beginning of our quality process. Because of that we have absolute trackabilty and traceability all the way through the supply chain from the supplier and in many cases the suppliers’ suppliers, all the way through to the customer,” he said.
Gray advises manufacturers to take a close look at their own supply chains. “There are massive amounts of in-efficiencies from just a cash utilisation perspective in supply chains.
“What does a supply chain do? It buys material, parks it somewhere as inventory until you decide to convert it to something, then you park it somewhere else while you are waiting to sell it. You just have to look at the stocks involved at every stage.
“Supply chain management is about taking waste out of the process.
The biggest problem Gray sees with other manufacturers is the fact they don’t look holistically at their supply chains. “Many companies still have their silos.”
He describes the supply chain as the entire life of that product. “It’s not a function within a company. It’s what has to happen to provide that product to that customer.
“Companies must realise that size is not important. Regardless of the size of your company, you can look at your supply chain and figure out where the waste is. You can do process mapping and figure how to drive waste out, either time or material, or both.
“The reason you do supply chain management is to liberate cash. If you can reduce you inventories, and accelerate the velocity through your supply chain that’s a good thing for everyone,” he said.